Britain 'sleepwalking towards EU exit' under Cameron, says Labour

PM comes under attack on two fronts as Labour seeks to reset pro-European case and key Tory demands double referendum

David Cameron is heading to Brussels later this week for talks on the EU budget knowing he has little chance of achieving the real-terms cut demanded by Tory Eurosceptics and Labour in last month's vote. Photograph: Bertrand Langlois/AFP/Getty Images

David Cameron's stance towards the EU will come under pressure from two directions on Monday, with Labour accusing him of allowing Britain to "sleepwalk towards exit" and a leading Conservative demanding not just one referendum on Europe but two.

In a speech described by aides as "resetting the pro-European case", Ed Miliband will say that, under Cameron, Britain leaving the EU has become a realistic prospect for the first time in 30 years and pro-Europeans need to argue their case "in a new way" to avert such a damaging outcome.

In a separate intervention, David Davis, Cameron's rival for the Conservative leadership in 2005, will call for a "mandate referendum" within the next year on the powers that voters would like repatriated from Brussels, followed by a second referendum after a renegotiation of Britain's relationship with the EU.

Miliband is sensitive to the charge that voting for an EU budget cut meant Labour was abandoning Europeanism and, in a speech to the CBI, he will seek to cast the European case in modern terms.

Cameron's stance poses a grave danger to the UK, he will claim. "For more than three decades, our membership of the EU has seemed to be a settled question. Not any more," the Labour leader will say.

"Public scepticism about the EU has been on the rise for some time. Some cabinet ministers in this government now openly say we would be better off outside the EU.

"And many of our traditional allies in Europe clearly think Britain is heading to the exit door. Those of us, like me, who passionately believe that Britain is stronger in the EU cannot be silent in a situation like this. I will not allow our country to sleepwalk towards exit because it would be a betrayal of our national interest."

Miliband will argue that leaving the EU would be economic folly because investors like Nissan, Tata and Toyota come to Britain to gain access to the single market. "If we left the EU it would be the United States, China, the EU in the negotiating room - and Britain in the overflow room. We would end up competing on low wages and low skills: an offshore low-value economy, a race to the bottom," he will say.

The Labour leader will say the EU needs reform, particularly because its budget "often seems to match the priorities of the 1950s, not the 21st century". He will say that pro-Europeans too often "turned a blind eye" to the EU's failings and that Britain needs to build alliances to achieve reform.

In his speech on Monday at a ConservativeHome event, Davis, a former Europe minister and a leading Eurosceptic on the Tory benches, will call for a double referendum: a mandate referendum, that would allow the British public to vote on what powers the government should seek to get repatriated from Brussels, followed by another referendum at the end of the negotiating process that would allow people to vote to leave the EU if they were unhappy with the outcome.

Interviewed on the BBC's Andrew Marr Show on Sunday, Davis said a mandate referendum would give the government "a huge negotiating lever" in talks with Brussels. He said he would like it to take place before the 2014 European elections and did not deny one aim was to diminish the threat to the Tories posed by Ukip. Leaving the EU was "not a frightening option".

Cameron, who is expected to set out his loEurope strategy before Christmas, has virtually committed himself to a referendum on Britain's relationship with the EU after 2015. But Davis wants legislation for a referendum in 2013, for which there is no Lib Dem support in the coalition.

On Thursday a separate crisis, involving Britain's relationship with the European court of human rights (ECHR), will come to a head when Chris Grayling, the justice secretary, publishes a draft bill in response to the court ruling that outlaws a blanket ban on prisoners voting.

The bill will contain options including the status quo, allowing prisoners to vote if they are serving sentences of less than six months, and allowing them to vote if they are in jail for less than four years.

Cameron has said he is opposed to giving prisoners the vote and Labour agrees.

Dominic Grieve, the attorney general, has said Britain could be thrown out of the Council of Europe, which oversees the court, if it fails to comply with the ruling.

But Grieve also said, in evidence to a committee last month, that there was "considerable flexibility" in how the ruling had to be applied and that, for example, giving the vote to prisoners who attend a civic responsibility course could satisfy the court.

The shadow home secretary, Yvette Cooper, said a parliamentary vote would strengthen the UK's argument for keeping the ban, which is backed by Labour.

"You have to keep going back to the European court on this because I think the job of the European court is to look at what is proportionate, what is responsible," she told the BBC's Sunday Politics. "We haven't passed laws on this before, even though we have passed motions, and I think when we do so, the European court should look at it again."